Cider the success story for alcohol industry

While beer consumption in Australia is falling, it’s not all bad news for the alcohol industry: research firm IBISWorld is forecasting a 21.5% increase in cider sales over the next five years.

Sales of cider have grown at an annualised 33.9% over the past five years. In the 2014-15 financial year alone, Australians will spend $1 billion on cider.

However, the cider market’s gain is the RTD market’s loss. New cider varieties are drawing drinkers away from RTD beverages like pre-mixed vodka or whiskey drinks.

“While many consumers have switched to craft and imported beers, others have changed to wine and cider,” said IBISWorld General Manager Daniel Ruthven.

“Cider producers have found great success in marketing the beverage as a refreshing alternative to beer. Additionally, ciders have benefited from increased taxes on ready-to-drink mixes, with many young party-goers now opting for cider as a cost-saving exercise.

“Beer consumption is falling, but revenue is increasing as consumers opt for imported and craft varieties. This willingness to pay a premium for quality and variety is also driving revenue in the cider market.”

National expenditure on alcoholic beverages. Source: IBISWorld.

While cider producers are having a good run, the price of fruit can be volatile, making it difficult for cider producers to plan for price jumps. However, cider’s high profit margins mean that producers are better placed to absorb price fluctuations than some other alcoholic drinks producers, IBISWorld says.

“Furthermore, many large players in cider production buy fruit from growers under contracts with a set price, limiting potential variability in purchase costs,” said Ruthven.

“And, at the other end of the market, some smaller producers are able to avoid exposure to price movements by growing their own fruit.”

Imported ciders have grown from 25.8 to 27% of domestic demand over the past five years. Currently, New Zealand holds 30.3% of the imported cider market, just ahead of Sweden at 29.4%. Ireland is not far behind with a 23% share of the market.

Rekorderlig has rapidly expanded its range of flavoured ciders, helping the company boost its Australian market share and leading Sweden to overtake previously significant sources of imports like the UK.

Local cider vs imported cider. Source: IBISWorld.

“Australia isn’t renowned internationally as a cider producer - at least, not yet. Improvements in the quality and range of Australian ciders are likely to make them more attractive abroad,” said Ruthven.

“Meanwhile, domestic demand is anticipated to continue to account for the lion’s share of local cider production. Of course, this may change as the market becomes more saturated - only time will tell.”